Heartening sequential performance:Tata Elxsi (TELX) reported a strong revivalin sequential performance driven by strong volume growth.

Revenue, Margin Performance Heartening; Improved Disclosure Key Positive Tata Elxsi (TEL) posted improved performance in 2QFY20, with revenue up by a healthy 6.7% QoQ to Rs3.86bn. The key SDS segment saw a solid 6.1% QoQ revenue growth, which comes after two successive sequential declines. On the other hand, SIS revenue rose 28.5% QoQ on a low base. Within SDS, EPD revenue rose 5.3% QoQ, while IDV rose 11.3% QoQ. TEL has started disclosing more detailed operating metrics in terms of verticals, geographies, delivery-wise revenue, employee and client data, which we believe enabled a more granular understanding of its business. Within EPD, growth was led by the key Transportation vertical, which rose 9.2%...

Tata Elxsi Q1FY20 results were below our estimates on both the revenue and profitability front due to degrowth in Auto vertical Tata Elxsi reported revenue degrowth of 5.3% YoY (down 10.7% QoQ) to INR 3,617 mn against our estimates of INR 4,202mn. Overall, EBITDA margin contracted by 857 bps YoY to 19.3% (down 500 bps QoQ) indicating significant margin pressures. On a segmental basis, Software Development & Services (SDS) revenue declined by 4.7% YoY to INR 3,519.2 mn, while the segmental PBT for SDS declined by 32% YoY to INR 783.7mn....

Yet Another Set of Bad Numbers: Tata Elxsi (TELX) reported another set of disappointing numbers as ramp downof JLR business accelerated and pain in passenger vehicle market continues.Revenues for the quarter came in at Rs. 3617 Mn, down 11% sequentially.

Despite strong domain expertise in the automotive vertical (~52% of rev), growth prospects have been dented by project delays, particularly in the JLR portfolio (~18% of rev). Part relief is likely from (1) Driving greater annuity/large deals (sales incentives), (2) IP-revenue, (3) Geo expansion, (4) Automotive vertical adjacencies, (5) Momentum in Healthcare, and (6) Account mining (currently sub-scale). We have factored 9/6% USD rev/EPS growth over FY19-21E. We reckon that the valuation drift (23x to 16x P/E) over the past year is unlikely to reverse soon, with limited growth visibility (lower project duration vs. peers), near-term growth challenges (automotive vertical) and margins normalizing. We assign a Fair Value of Rs 945, at 18x FY21E EPS (25% discount to its historical valuations and 10% discount to LTTS). Tata Elxsi (TELX) is an integrated design and engineering services company (USD 230mn rev) with Automotive, Broadcast & Communication being key verticals. TELX growth decelerated in FY19 to 9% CC following 21/15% CC in FY17/18, margin moderated from its 1Q peak. We recently hosted investor meetings with TELX management. TELX is a high quality ER&D; services franchise facing industry headwinds. Despite slowdown in global automotive R&D;, industry opportunities include (1) Shifts within R&D; allocation, (2) Underpenetrated ER&D; outsourcing market (vs. IT services), (3) Fragmented vendor-base and scale differential vs. large peers (5 to 7.5x vs. TELX).

Weak auto segment spoils the show: Tata Elxsi (TELX) continued with its weak performance in Q4FY19.

Tata Elxsi (TELX) reported revenue growth of 7.9% YoY (flat QoQ) to INR 4,051mn. Net Profit was marginally up by 1.4% YoY to INR 713mn (+8.0% QoQ) with NPM of 17.6% (down 113bps YoY). By Segment: The growth was led by Software Development & Services (SDS) segment which recorded a growth of 8% YoY (down 1.2% QoQ) and accounted for 96% of total revenue. Revenue growth was also supported by the System Integration and Support Services (SISS) segment which grew 5.4% YoY to INR 162mn (+19.8% QoQ) Cues on the margin front were mixed. EBIT contracted by 104bps YoY to 22.7% in Q4FY19 (down 120 bps QoQ). PBT margin in its key SDS segment witnessed a ~556 bps contraction on a YoY basis while the SISS segment saw a 408bps expansion....

INR4.05b, a 5% miss to our estimate of INR4.27b. In CC terms, this implies a decline of ~0.5% QoQ, based on our analysis, and in USD terms, revenue grew ~0.5% QoQ to USD57.5m. EBITDA margin shrank 110bp QoQ (-100bp YoY) to 24.3%, below our estimate by 120bp, mainly due to an increase in...

TELX clocked 2% QoQ CC and 10% YoY CC growth during the quarter. Growth was impacted by extended furloughs, which affected the work both at onsite and offshore locations, and was broad-based across business units. Short-term anomalies on margins were a function of currency movements, but TELX remains confident that margins will continue to be ~25%.

Revenue growth maintained: Tata Elxsi (TELX) reported a revenue growth of17.8% over previous year. Revenue growth on YoY basis is maintained at Q2 Levels.Sequentially, revenue growth was flattish at 1%.

8 January 2019 TELXs revenue grew 17.8% YoY to INR4.07b in 3QFY19, lower than our estimate of +20% YoY. The company delivered INR revenue growth of 1% QoQ, which implies a sequential decline in USD revenue (as INR depreciated by 2%+ QoQ against USD). On a YoY basis too, USD revenue growth decelerated to 5.4% from 19% only three quarters ago. This can partially be attributed to 3Q seasonal weakness. EBITDA margin shrank 110bp QoQ to 25.4%, below our estimate of 26%. PBT margin of 23.2% missed managements guidance of 24-25%, mainly due to forex losses. Consequently, PAT grew by only 5% YoY (-20% QoQ; our quarter, 3Q saw a much slower growth in Software development (97% of revenue; +1% v/s +6% in 2QFY19), while System Integration (SI; 3% of revenue) grew 19% QoQ (v/s -12% QoQ in 2QFY19). PBT margin came in at 23.2%, lower than our estimate of 26.5%.

Rightly Placed with High Potential: We believe Tata Elxsi (TELX) which offers cutting edge solutions in the areas of auto, communication and broadcasting and designing services is rightly placed to tap growing demand for its offerings.

Going forward, given substantial growth being witnessed in digital portfolios of most IT firms, along with investments into avenues like connected cars, autonomous vehicles, AR/VR experience and automotive electronics, we believe TEL will be one of the key beneficiaries of the same, given its presence in these emerging businesses. We expect its diversified portfolio including automotive, broadcast, medical and design expertise to enable TEL to leverage these investments disproportionately. We would watch growth from IP-led engagements in future given scope for margin expansion, with the Autonomai platform a critical driver. Nonetheless, owing to macro concerns, global trade wars and issues with the British car industry - its largest...

8 October 2018 TELXs reported 18% revenue growth YoY which accounts to revenue of INR4b, lower than our expectation of 20% growth. Sequential growth for TELX at 5.4% was partially fueled by INR depreciation, adjusted for which, we estimate the growth would be marginal. Historically, 2Q has seen sharper growth for TELX given seasonality. EBITDA margin expanded by 190bp YoY to 26.5% in line with our estimates. Consequently, PAT growth of 44% YoY to INR822m was above expectations by 4% on account of higher-than-expected Other Income. Similar to the last quarter, revenue from SI (3% of revenue) declined by 12% QoQ, whereas that in Software Development & Services grew by 6% QoQ. Were the decline to not exist, revenue growth would have been higher by ~40bp. Given growth in the Engineering Services market, emergence of new areas like Medical Devices and Cloud, and strong traction across segments, we are currently expecting 20% revenue CAGR over FY18- 20.

Healthy Revenue Growth with Impressive Operating Margin Tata Elxsi (TEL) has posted an impressive performance in 1QFY19 with revenue rising by 1.8% QoQ (+18.2% YoY) to Rs3.82bn. While revenue from SDS business grew by 2.5% QoQ (+19.6% YoY) to Rs3.69bn, revenue from SIS business fell by 16.4% QoQ (-12.2% YoY), as TEL continued to focus more on higher-margin SDS business. This was the highest YoY growth achieved by the SDS business in 2 years (since 1QFY17). Led by operating leverage and cost control, EBITDA crossed Rs1bn-mark for the first time ever (12% QoQ and 45% YoY to Rs1.07bn). Net profit rose 0.3% QoQ on lower other income, while YoY growth was robust at 41.7%....

TELX's revenue grew 15% YoY (our estimate: +14%) to INR3.8b. EBITDA margin expanded 210bp YoY to 25.3% (largely in-line). PAT growth of 58% YoY to INR703m was above our estimate because of higher other income. For FY18, TELX clocked 15% CC growth, 120bp margin expansion and 38% PAT growth.

Revenue increased by 8.64% to Rs. 375.38 Cr in Q4FY18 when compared to the previous quarter Tata Elxsi Ltd Q4FY18 results Comment

TEL performed impressively yet again in 4QFY18 with healthy growth in SDS business. We expect healthy growth to continue, as TEL focuses on driving growth in high-margin SDS business through focus on niche verticals and services. We believe TEL is a very good long-term investment opportunity, given presence across fast-growing solutions, niche operational areas, design expertise, marquee client base, pricing power, operating leverage, healthy cash flow, returns on capital, and strong earnings growth. At the CMP, the stock trades at a PE of 25.6x/22.4x FY19E/FY20E EPS, respectively. We expect TEL to command 25x forward earnings, at a premium to most companies in the sector in light of superior growth and operating metrics. Upgrading...